IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In Re: Chapter 11 PACIFIC ENERGY RESOURCES LTD.

et al., Debtors. [Re: Docket No. 15] COOK INLET REGION, INC.S JOINDER TO MEDEMA FAMILY TRUST'S MOTION TO COMPEL SEGREGATION AND PAYMENT OF ROYALTY INTERESTS Cook Inlet Region, Inc. (CIRI) hereby joins in the Medema Family Trusts Motion to Compel Pacific Energy Alaska Holdings to Segregate and Pay Medemas 1.2% ORRI in the West MacArthur Leases and provide a Full Accounting of Production from the Relevant Properties Including Disposition of Cash Proceeds from Sale of Production (the Medema Motion) (Docket No. 309). In support of its joinder, CIRI states as follows:
1.

Case No. 09-10785 (KJC) (Jointly Administered)

CIRI is the owner of approximately 807 acres of land including subsurface

rights, on the west side of Cook Inlet, Alaska, designated as Federal Lease A-035017. This land is currently leased to Pacific Energy Alaska Operating LLC (PEAO) as successor-in-interest. See lease documents attached as Exhibit A. Under the terms of the lease, CIRI is to be paid $1 per acre per year ($807 per year) plus a 12.5% royalty interest in any gas or oil produced on Federal Lease A-035017. See Section (1)(d)(1). Currently, there are two gas wells in production on the leased land, which wells are described as West Forelands #1 and West Forelands #2. CIRIs royalty rights provide that CIRI owns

12.5% of any oil or gas produced on the leased land. The royalty rights are superior to any and all overriding royalty interests, and are not subject to any production costs. See authority cited in Medema motion.1
2.

PEAO has listed pre-petition royalty payments of $52,662.54 due CIRI

related to West Forelands #1 and #2, and is also due post-petition royalty payments for gas production from these wells in an unknown amount. 2
3.

It is CIRIs understanding that most if not all gas produced from West

Forelands #1 and #2 is shipped to PEAOs Kuskatan Production Facility, and used to generate electrical power that supports PEAOs projects.
4.

The proceeds generated from CIRIs pre-petition and post-petition royalty

interests are not property of PEAOs estate, and any amounts due must be immediately paid to CIRI, given that the gas (and proceeds) are CIRI property and not estate property. Any pre-petition proceeds related to CIRIs base royalty interests are proceeds held in trust by PEAO for the benefit of CIRI. To the extent CIRI royalty funds were

commingled with other PAEO funds, the lowest intermediate balance test must be used to trace CIRI monies.
5.

CIRI has reviewed the objections to Medemas Motion filed by the Debtors The

and the Unsecured Creditors Committee (Committee) on May 27, 2009.

1

CIRIs royalty interests constitute a holdback/carve out from the working interests received by PEAO (through its predecessors-in-interest) under the lease. As such, the royalty rights hold an even stronger superior position than the ORRI rights possessed by Medema. 2 The monthly amount due CIRI on its 12.5% royalty interest is calculated by the Minerals Management Service (MMS), which also holds a royalty right in production from these wells. CIRI has not been provided with the MMS reports for any period beyond December 2008, and consequently cannot verify the pre- or post-petition amounts.

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Committee has requested a 30 day extension on the Debtors payment of postpetition royalty interests in order to work with the Debtors and other interested parties to determine the particulars of the various postpetition interests, and to determine if any disputes exist. To the extent the court grants the Committees request, CIRI requests that its royalty interests be subject to discussions so that it can verify its rights.
6.

Unlike Medema, the royalty interests held by CIRI are land owner royalty

interests rather than overriding royalty interests (ORRIs). However, like the Medema ORRIs, the land owner royalty interests are not property of the debtors estate.
7.

The debtor has provided a single line item for proposed Alaska royalty

payments in its recent cash collateral budget of $333,000 for the week of May 15, 2009. No previous or further royalty payments are included in the budget covering March 13, 2009 through June 26, 2009 (Docket No. 284). CIRIs royalty payments, which have historically averaged about $10,000 per month, may be included therein, but without a specific breakdown of the royalty interest holders and amounts to be paid that constitute the $333,000, it is impossible to determine whether CIRIs royalty payments are included. To date, CIRI has received no post-position royalty payments. .
8.

CIRI hereby joins with Medema and moves the court to compel the debtor

to (1) provide an accounting of CIRI royalty payments by way of MMS production reports for the months of January, 2009 through the present, (2) to segregate any current and future royalty amounts due CIRI, (3) for an immediate payment of all CIRI royalty payments due for the months of January, 2009 through April, 2009, (4) for royalty payments in subsequent months as they become due in the ordinary course of business,

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and (5) for a specific breakdown of all PEAO royalty payments proposed in the current and future cash collateral budgets. Dated: May 28, 2009 DORSEY & WHITNEY (DELAWARE) LLP

By: /s/ Robert W. Mallard Eric Lopez Schnabel, Esq. (DE # 3672) Robert W. Mallard, Esq. (DE # 4279) 1105 N. Market Street, Suite 1600 Wilmington, DE 19801 Tel: (302) 425-7171 Fax: (302) 425-7177 Counsel for Cook Inlet Region, Inc.

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE ______________________________________ In re: ) Chapter 11 ) PACIFIC ENERGY RESOURCES LTD., et al., ) Case No. 09-10785 (KJC) ) Debtors. ) (Jointly Administered) ) _____________________________________ ) ) CERTIFICATE OF SERVICE I, Robert W. Mallard, Esq., hereby certify that on the 28th of May, 2009, Cook Inlet Region, Inc.s Joinder Medema Family Trust's Motion to Compel Segregation and Payment of Royalty Interests was served upon the following parties via hand delivery or first class mail.

James E. O'Neill Kathleen P. Makowski Laura Davis Jones Scotta Edelen McFarland Pachulski Stang Ziehl & Jones LLP 919 N. Market Street 17th Floor Wilmington, DE 19801 David B. Stratton James C. Carignan Pepper Hamilton LLP Hercules Plaza, Suite 5100 1313 Market Street Wilmington, DE 19801 Francis J. Lawall Pepper Hamilton LLP 3000 Two Logan Square Eighteenth & Arch Streets Philadelphia, PA 19103

United States Trustee 844 King Street, Room 2207 Lockbox #35 Wilmington, DE 19899-0035 Filiberto Agusti Steven Reed Joshua Taylor Steptoe & Johnson LLP 1330 Connecticut Aveue NW Washington, DC 10036 Robbin Itkin Katherine Piper Kelly Frazier Steptoe & Johnson LLP 2121 Avenue of the Stars, 28th Floor Los Angeles, CA 90067

Dated: May 28, 2009

DORSEY & WHITNEY (DELAWARE) LLP /s/ Robert W. Mallard Robert W. Mallard (DE Bar No. 4279) 1105 North Market Street (16th Floor) Wilmington, Delaware 19801 Counsel for Cook Inlet Region, Inc.